Airplane Production: A Law of Diminishing Marginal Product Exercise

Law of diminishing marginal product, fixed and variable inputs, average and marginal product, short run

This experiment is appropriate for principles level and higher. It can easily be run in classes of 50 or less, but can also be run in larger classes with a subset of the students participating while the others observe. The time required depends on the number of rounds of production, but the experiment can be run in a 50 minute class (with limited debriefing). In a 75 minute class, the entire experiment can easily be completed with full debriefing. The experiment should be run prior to discussion of production.

Prior to the experiment:
Provide students with airplane folding instructions. A simple design is best.

Experiment:
Start by running through the folding of an airplane once.

Once everyone is clear on how to fold the airplanes, divide students into production groups of 2 or 3. Distribute a manila folder (factory truck) and pen (for writing "Econ Glider" on each plane) to each group. These will serve as the fixed inputs to production. Designate a central location for paper distribution.

Allow students production runs of 3 minutes. Students will use their factory truck to get paper (one sheet at a time) from the distribution center. They must finish producing the airplane including writing "Econ Glider" on a wing and then successfully complete a test flight for the plane to count as completed.

At the end of the production run, count the number of planes produced by each producting group and record the data.

After the each production run combine two groups of students to increase the amount of labor. Be sure to remove pens and folders such that each group has only one of each. Continue increasing group size until the entire class is working together as a single group.

Debriefing:
Lead students through calculating the average and marginal products of labor in each production round. The results will show students that the marginal product of labor will eventually fall as additional labor is added to the fixed inputs. Elicit reasons for this result from students.

Reference:
Chapter 10 in "Experiments with Economic Principles: Microeconomics," 2nd Edition by Theodore Bergstrom and John H. Miller (Irwin/McGraw-Hill Publishers), 2000. Instructors should also request a copy of the Instructor's Manual.

Variants:

Variants on this experiment include the production of alternative products and are discussed in the following.

Hazlett, Denise. Economic Experiments in the Classroom. Reading, MA: Addison Wesley Longman, 1999. (Experiment #8)

Yandell, Dirk. Using Economic Experiments in the Classroom. Upper Saddle River, New Jersey: Prentice Hall, 1999a. (Experiment #6)

Neral, John. (1993). "Widget Production in the Classroom." Classroom Expernomics (http://www.marietta.edu/~delemeeg/expernom.html), 2.

Student achievement can be determined through students' contributions to the debriefing discussion. Further, "Experiments with Economic Principles: Microeconomics" includes homework exercises developed to accompany this activity.

A copy of "Experiments with Economic Principles: Microeconomics" and the instructor's manual can be obtained from your Irwin/McGraw Hill representative or online at http://catalogs.mhhe.com/mhhe/viewProductDetails.do?isbn=007229518X.